Los Angeles: Broke and Broken

During the Budget and Finance Committee hearings for Mayor Antonio Villaraigosa's proposed 2011-12 budget, Stephen Box gamely took a seat inside the ornate John Ferraro Council Chamber in Los Angeles City Hall and watched things slowly unfold over four days of sometimes mind-numbing testimony. It wasn't always the highest of dramas, but Box, a community activist, bicycling advocate and recent City Council candidate, wanted to see how city leaders were running L.A.

At a table at the front of the high-ceilinged chamber, city department heads answered questions from the budget committee's chairman, Councilman Bernard Parks. Some squirmed, others were defiant, and still others praised the mayor and his staff — though Villaraigosa was thousands of miles away visiting Chicago and Washington, D.C., during most of the hearings.

"There's no kind of holistic or systemic approach to running the city," Box reflects later. "We're not improving or solving long-term problems, just postponing."

Los Angeles City Hall is overspending by $52,168 per hour, which translates into a budget deficit, beginning July 1, of $457 million. (That's the mayor's figure. Chief Legislative Analyst Gerry Miller and the council's budget committee say the figure is $336 million.) Box says the mayor's proposed budget is "obtuse" and difficult for anyone to comprehend — or to fundamentally repair. "I don't know if it's incompetence or a conspiracy," Box says. "But this thing is very hard to understand. Civic engagement at City Hall is always a struggle, and then we're chastised if we don't know all of the facts."

L.A. Weekly examined the budget for the mayor's own office in an effort to understand just a small snapshot from Villaraigosa's 389-page citywide budget proposal, which the City Council has just two weeks in May to understand, adjust and approve as its blueprint for fixing a badly ailing city.

The paper found that Villaraigosa's official budget for his own office — in many ways a microcosm of the $6.9 billion city budget — understates by millions of dollars what Villaraigosa will spend on his staff, understates by nearly 100 percent the number of employees working for him, and falls far short of an "11 percent cut" to the Mayor's Office. The paper also found that key officials who should know specific, basic fiscal details about the operations of the Mayor's Office are in the dark.

Villaraigosa recently announced to an audience of cheering, impressed students at Jefferson High School that he is cutting his own office by 11 percent — and the L.A. media repeated his claim. The Weekly has determined his true office budget cut is about 2 percent and his operation alone will cost taxpayers about $42 million.

The dubious data speak to an identical but broader practice by Los Angeles leaders of maintaining secrecy when presenting city budget costs to the public; obscuring the existence of huge, undiscussed budget expenditures such as automatic bonuses; and using other questionable methods that have helped create rolling deficits and major cuts in city services each year.

Last year, false claims by City Council members and the mayor — that the fat had been cut — allowed Villaraigosa and Councilman Eric Garcetti to convince a compliant and largely unquestioning City Council to close all 73 Los Angeles libraries two days a week. It was a radical move, one that was rejected in every other significant U.S. city hammered by the recession. The move gave L.A. a black eye nationally.

Now, the same secret spending that helped precipitate the library closures is again larded throughout Villaraigosa's $6.9 billion budget, which the City Council begins debating on May 17.

The situation underscores a deep concern of Box and other City Hall observers: that L.A.'s policymakers don't have the chops to steer the city out of its budget crisis, and that taxpayers are effectively left in the dark.

For example, looking at the microcosm, Villaraigosa's proposed budget states that 94 employees work for the mayor during this current fiscal year, with total salaries costing $7.7 million.

This is untrue. In this fiscal year, Villaraigosa spent more than twice that dollar figure, at one point employing more than 200 staffers — many more than were hired by mayors James Hahn or Richard Riordan. Documents obtained by L.A. Weekly through a California Public Records Act request show he recently thinned his staff slightly through attrition to 196, including 173 full-time and part-time employees, 16 who are "borrowed" from around City Hall and seven paid interns.

Villaraigosa goes on to claim in his 2011-12 budget that his office will cost $6.8 million for salaries. That is also untrue — too low by nearly 100 percent. Mirroring the rest of City Hall, which employs 32,267 workers, the mayor plans no layoffs in his office.

How does Villaraigosa fund his hidden 79 employees, who didn't appear in last year's budget and don't appear again in the July 1 budget, seeking just 94 slots?

As with much of the $6.9 billion citywide budget, only a handful of people in Los Angeles City Hall know the answer to this highly public question. At the City Controller's Office, chief deputy controller Claire Bartels couldn't definitively answer where the mayor gets his extra millions.

Bartels couldn't explain the discrepancy between the 183 mayoral staffers shown in the Controller's Office records and the 94 Villaraigosa claims in his budget — nor precisely where the millions of dollars are coming from. She could only broadly note that the salaries of 149 of the 183 come from the General Fund, while 34 are funded by "grants" — whose sources and purposes the office of City Controller does not know. But even those numbers were wrong.

If the Office of City Controller doesn't know the funding sources, costs and duties of these public positions, who does?

City Council President Garcetti, who will lead the council's two-week debate to approve the budget, is still smarting over criticism that a year ago he agreed to close the 73 libraries on Sundays and Mondays rather than look more deeply into hidden spending. Yet Garcetti did not even sound curious about how Villaraigosa's office staff is paid for. He referred the Weekly to the City Controller.

The man most in the know is City Administrative Officer Miguel Santana, chief financial adviser for Villaraigosa and the City Council. Bartels referred the Weekly to Santana — but Santana provided only a few pieces of information via email. He said he was too busy to discuss exactly who pays for all those mayoral staffers.

After the mayor claimed in his formal budget that this year he employs only 94 people, his own office in April handed the Weekly his real salary list: It showed 172 employees' salaries, not 94, with obscure, bureaucratic titles — for example, "Mayoral Aide V."

The funding sources cited by the mayor for paying his staffers conflict with the funding-source information provided by the City Controller's Office.

Don't the mayor and City Controller know, and agree on, exactly where the money is coming from and what it's for?

The April salary list provided by the mayor's aides states that 51 staffers are funded by the unspecified "grants," with the rest coming mostly from the General Fund. The City Controller's office, by contrast, says 34 jobs are funded by these grants.

Critics are calling for a higher level of fiscal competence from Los Angeles City Hall, saying such discrepancies should not be a mystery to city officials. But when Villaraigosa's spokeswoman, Sarah Hamilton, was asked to shed light on the clashing facts and figures cited by city officials who were trying to explain the Mayor's Office budget, she forced the Weekly to file a formal California Public Records Act request.

Those new documents, handed to the Weekly in May, show Villaragosa's staff at 196, including seven interns, 16 borrowed city employees and 173 core staff. The list reveals a surprising fact that the Controller's Office did not have in hand: Nearly one-fifth of the mayor's core staff — 31 people — is a homeland security team, 25 of whom are funded by federal agencies. Just four of Villaraigosa's staff are assigned to "education" or "education/policy," the mayor's signature reform issue. Eleven of his employees are funded by foundations or grants to work in such areas as "strategic partnerships" and "energy and environment."

Only three of Villaraigosa's aides specifically work on city budget and finance issues. Nine employees work in his press office, three on "new media."

The mayor's huge homeland security team — identified as 31 accountants, grant writers and other desk workers — is rarely mentioned by the media. Nor are the 16 staffers on loan from the Housing, Harbor, Sanitation, Building and Safety, Water and Power, Police, Personnel, Fire, Airport and Community Development departments. The Mayor's Office uses them for free, and the departments pay. He also has seven interns who earn $15 an hour — five of them paid by federal grants.

Understanding the Mayor's Office budget is clearly not an easy task. The byzantine layers involved in getting at these true costs allow for inconsistencies and confusion among the top offices in City Hall. The same holds true for the larger, city-wide budget that in a few days will be debated by an often poorly informed City Council.

And that makes it impossible for members of the L.A. public, who are footing the bill, to ask intelligent questions or to act as fiscal watchdogs.

One of the most outspoken critics of City Hall fiscal practices, Jack Humphreville of the Greater Wilshire Neighborhood Council, says there are palpable, negative costs to the mayor's and council's confusion and lack of transparency: Humphreville, who like Stephen Box blogs about city fiscal policy at CityWatchLA, says: "They are supposed to put $300 million a year [to maintain roads] and there's [$50 million] if they're lucky. They don't even budget for it. ... If this happened in corporate America, people would be put behind bars."

One closed-door effort to renegotiate these automatic bonuses with city unions was abandoned by the Villaraigosa administration in 2007. Meanwhile, the automatic bonus amounts have skyrocketed 400 percent in the past decade.

The $150 million hit to city coffers due to these bonuses is not mentioned in the budget the City Council will debate. The only nod to the bonuses' existence is a paragraph on page 33 that broadly alludes to ways to begin reducing the payments, ranging from "change all bonuses to flat-rate amounts" to "defer or eliminate unnecessary bonuses."

In her front-page scoop, Cavanaugh described the bonuses as a "stealth expense" that few City Hall officials know about.

There are other massive, and equally stealth, expenses that are all but impossible to divine in Villaraigosa's citywide budget. And, again, the Mayor's Office budget for the next fiscal year echoes the larger budget's vagueness and obscureness.

The true cost of employing 32,267 city workers (there are 47,089, but 14,822 airport, port and utility workers fall outside the general fund) is one of those stealth costs.

Three kinds of employee compensation — pension contributions, Medicare benefits and workers' free monthly healthcare premiums — add a hefty 40 percent on top of each worker's salary, according to City Administrative Officer Santana. The public rarely hears about that 40 percent when city salary costs are debated.

That 40 percent extra cost is left out of the "Total Department Budget" for every city department. It is instead obscured under the title of "Related and Indirect Costs."

When Villaraigosa states that "Mayoral Aide V" makes a salary of $56,000, the actual cost to taxpayers is $78,400 — the 40 percent in missing costs included.

As City Hall watchdog Humphreville notes, it's no small omission: "That is a real cost of doing business."

While most Angelenos pay a stiff out-of-pocket fee for their own monthly health coverage, the 32,267 who work for the City of L.A. get monthly healthcare insurance for free or at a dramatic discount. Those premiums cost Angelenos $6,800 to $10,000 per city employee each year, and are sapping tens of millions of dollars from core city services, from parks to street maintenance.

Los Angeles residents could use such knowledge to decide, at municipal election time, whether they're glad that the 15 council members and mayor spend city revenue on free health insurance instead of, for example, on aging infrastructure.

But the public never hears about that $6,800 to $10,000 per-employee figure. And in the mayor's budget for 2011-12, there's no clear explanation of this key freebie.

Yet another hidden practice is the mayor's habit of using employees from other city departments on "loan." City Controller Wendy Greuel confirms the practice, but cannot identify the names, job duties or size of this force of borrowed staffers.

When pressed, Greuel's office released this statement to the Weekly: "To institute greater controls, Controller Greuel is asking all city departments to provide a list of any and all staff on loan to other departments and offices and make this information available to the public."

Asked to comment on Greuel's request, Villaraigosa aide Hamilton did not reply.

L.A. City Councilman Paul Koretz, chairman of the personnel committee, apparently is comfortable with Villaraigosa borrowing city employees. Koretz's spokesman, Paul Neuman, claims, "City departments occasionally detail staff to the Mayor's Office to assist the Mayor's Office in understanding issues of concern to that department. I think that can be helpful to the mayor's ability to serve."

But Keith Comrie, the city administrative officer from 1979-1999 — who understands the totality of the city budget, as well as the details — describes the loaning of city employees to the Mayor's Office as "unusual" and problematic.

If such a practice is now OK, asks Comrie, then "why can't you move thousands of people from the Department of Sanitation to the DWP at any given time?"

According to Comrie, loaning employees to mayors Riordan and Tom Bradley rarely, if ever, happened during his two decades at City Hall.

As Comrie explains, the department heads in City Hall propose their annual budgets on the basis of the work required to provide specific public services. When the Mayor's Office borrows employees from other departments, manpower falls, public services may suffer and specific budgeted monies for a department are spent on employees working elsewhere.

How does all of this shake out? At the snapshot level, Villaraigosa is claiming for his own office this year that his "94" employees and other office expenses will cost $23.2 million, and that he's making an "11 percent cut" of $922,000.

In fact, his true office costs to pay his core staff's 173 salaries, pensions, free or discounted healthcare premiums, Medicare and other office expenses are about $36 million — more than 50 percent higher than claimed. More than $2.4 million of that will be paid by federal agencies and other outside grants. Adding in utilities, building services and other costs, the mayor's office actually costs about $42 million.

His claimed "11 percent" official budget cut of $922,000 from his own office thus turns out to be an almost unnoticeable trim of about 2 percent.

For Jay Handal, chairman of Neighborhood Council Budget Advocates, the questions raised by the mayor's personal office budget signal a greater problem: the economic problems facing the city, and Villaraigosa's and the City Council's handling of them. "We're in big trouble," he says. "All you have to do is look at [the recent report by the Budget Advocates], and it will tell you how much trouble we are in."

But where you stand depends on where you sit. Asked if the proposed city budget is problematic or incomprehensible, Villaraigosa spokeswoman Hamilton says, "It's fairly simple to understand. It's fairly straightforward." She adds: "The putting together of the budget has been a very transparent process."